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FX Strategy: 'Hot Potato' + Fed Impatience = Lower EUR/USD

Published 03/01/2015, 01:42 AM
Updated 05/14/2017, 06:45 AM

The next leg lower in EUR/USD should be imminent as markets start pricing in a summer Fed hike and markets rouse to the effects of the QE scheme. A strong March non-farm payrolls report could be a first trigger for this.

We forecast EUR/USD at 1.10 in 6M but stress that we are likely to see the cross undershoot this level over the summer - we now target 1.10 in 3M (prev. 1.11).

Leverage funds should sell EUR/USD - we are short EUR/USD in our Danske FX Trading Portfolio. EUR-based real-money funds should increase USD hedge ratios on a EUR/USD sell-off. Corporate clients should hedge USD income through options.

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